Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ31—1ȱQUIZȱ
LegalȱConceptsȱ
Directions:ȱFillȱinȱtheȱblank(s)ȱwithȱtheȱmostȱappropriateȱtermȱorȱphraseȱtoȱcompleteȱ
theȱsentence.ȱ
ȱȱ Answersȱ
ȱȱ1.ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱareȱgoodȱagainstȱeveryoneȱexceptȱanȱ
HDCȱorȱanȱHHDC.ȱ
1._______________________ȱ
ȱȱ2.ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱisȱaȱmethodȱofȱdischargeȱthatȱconsistsȱ
ofȱanyȱactȱofȱtheȱcurrentȱholderȱthatȱindicatesȱanȱ
intentȱtoȱendȱtheȱobligationȱofȱpayment.ȱ
2._______________________ȱ
ȱȱ3.ȱA(n)ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱisȱaȱholderȱwhoȱtakesȱcommercialȱ
paperȱanytimeȱafterȱanȱHDC.ȱ
3._______________________ȱ
ȱȱ4.ȱTheȱmostȱcommonȱmethodȱofȱdischargingȱcomȬ
mercialȱpaperȱisȱbyȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ.ȱ
4._______________________ȱ
ȱȱ5.ȱDefensesȱthatȱareȱgoodȱagainstȱallȱplaintiffsȱsuingȱ
onȱaȱnegotiableȱinstrumentȱareȱcalledȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ.ȱ
5._______________________ȱ
ȱ6.ȱA(n)ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱmustȱqualifyȱasȱaȱholder,ȱtakeȱ
commercialȱpaperȱinȱgoodȱfaith,ȱgiveȱvalueȱforȱit,ȱ
andȱnotȱhaveȱknowledgeȱofȱanyȱdefense,ȱadverseȱ
claimȱto,ȱorȱdishonorȱofȱtheȱinstrument.ȱ
6._______________________ȱ
ȱȱ7.ȱTakingȱcommercialȱpaperȱinȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱmeansȱtheȱ
holderȱactsȱhonestly.ȱ
7._______________________ȱ
ȱȱ8.ȱA(n)ȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱisȱaȱpersonȱwhoȱhasȱphysicalȱposȬ
sessionȱofȱbearerȱorȱorderȱpaperȱpayableȱtoȱtheȱ
orderȱofȱthatȱpersonȱasȱaȱpayeeȱorȱindorsee.ȱ
8._______________________ȱ
ȱȱ9.ȱȱȱ A(n)ȱ___________ȱisȱaȱparty’sȱunauthorizedȱ
changeȱtoȱorȱcompletionȱofȱaȱnegotiableȱinstruȬ
mentȱintendedȱtoȱchangeȱtheȱobligationȱofȱaȱ
party.ȱ
9._______________________ȱ
10.ȱA(n)ȱ____________ȱisȱoneȱinȱwhichȱaȱpartyȱbuysȱ
goodsȱorȱservicesȱforȱpersonalȱorȱhouseholdȱuse.ȱ
10.______________________ȱ
ȱ
Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers 7-31
LegalȱApplicationsȱ
11.ȱHansȱrentsȱaȱhorseȱstallȱandȱpastureȱforȱhisȱquarterȱhorseȱfromȱhisȱneighbor,ȱ
Swanson.ȱHeȱowesȱ$500ȱinȱoverdueȱrent.ȱHansȱindorsesȱhisȱweeklyȱpaycheckȱ
andȱgivesȱitȱtoȱSwanson.ȱIsȱSwansonȱanȱHDCȱorȱanȱHHDC?ȱExplainȱyourȱanȬ
swer.ȱ
ȱȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
12.ȱJacksonȱowedȱ$8,000ȱonȱaȱnoteȱheldȱbyȱSmithton.ȱSmithtonȱdiscoveredȱthatȱJackȬ
sonȱwasȱnearlyȱbankruptȱsinceȱheȱhadȱbeenȱpayingȱexpensiveȱmedicalȱbillsȱforȱ
hisȱchronicallyȱillȱwife.ȱSmithtonȱdrewȱaȱlineȱinȱinkȱthroughȱJackson’sȱnameȱonȱ
theȱnote.ȱHasȱJackson’sȱobligationȱtoȱpayȱbeenȱdischarged?ȱExplainȱyourȱanswer.ȱ
7-32 Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ31—1ȱPRACTICEȱACTIVITYȱ
Readȱtheȱfollowingȱcasesȱandȱanswerȱtheȱquestionsȱaboutȱthem.ȱAttachȱaȱpageȱifȱadditionalȱ
spaceȱisȱneededȱforȱanswers.ȱ
ȱ
1.ȱGeraldȱowedȱKaneȱforȱsomeȱcowsȱheȱhadȱboughtȱfromȱKane.ȱGeraldȱaskedȱhisȱ
mother,ȱGrace,ȱtoȱpayȱKane,ȱandȱheȱpromisedȱtoȱpayȱGraceȱbackȱwithȱtheȱmoneyȱ
saysȱheȱshouldȱbeȱableȱtoȱrecoverȱtheȱ$6,100ȱbecauseȱheȱwasȱaȱholderȱinȱdueȱ
courseȱofȱtheȱcheckȱandȱGrace’sȱproblemȱwithȱherȱsonȱisȱthereforeȱnotȱaȱbasisȱforȱ
notȱpayingȱhim.ȱIsȱheȱcorrect?ȱExplain.ȱ[Kaneȱv.ȱKroll,ȱ538ȱN.W.2dȱ605ȱ(Wis.ȱ
ȱ
ȱ
ȱ
ȱ
2.ȱPetersonȱenteredȱintoȱaȱseriesȱofȱloanȱagreementsȱwithȱCrownȱFinancialȱComȬ
panyȱinȱwhichȱPetersonȱwasȱtoȱpayȱoffȱtheȱloansȱinȱthreeȬyearȱinstallments.ȱAsȱ
indicatingȱthatȱ$363,875.62ȱwasȱdueȱonȱtheȱfourthȱnote.ȱThatȱsumȱwasȱtheȱdifferȬ
enceȱbetweenȱ$860,837.57ȱandȱ$499,658.95.ȱPetersonȱprotestedȱthisȱpaymentȱandȱ
allegedȱthatȱtheȱwordȱ“cancelled”ȱonȱtheȱfaceȱofȱtheȱfourthȱnoteȱrepresentedȱaȱ
dischargeȱofȱthatȱdebt.ȱWithȱtheȱ“cancelled”ȱnotation,ȱisȱtheȱdebtȱdischargedȱbyȱ
Crown,ȱaȱholderȱinȱdueȱcourse?ȱExplain.ȱ[Petersonȱv.ȱCrownȱFinancialȱCorp.,ȱ476ȱF.ȱ
Supp.ȱ1155ȱ(E.D.ȱPa.ȱ1979)]ȱ
Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers 7-33
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ31—1ȱRETEACHȱ
ȱ
Directions:ȱWriteȱtheȱanswersȱtoȱQuestionsȱ1–7ȱonȱtheȱblanksȱprovided.ȱTheȱanswerȱ
toȱQuestionȱ8ȱshouldȱappearȱinȱtheȱverticalȱboxes.ȱ
ȱ
ȱȱ 8.ȱ
1.ȱȱ __ȱ__ȱȱ__ȱ__ȱ__ȱ
3.ȱȱ __ȱ__ȱ__ȱȱ__ȱ__ȱ__ȱ
5.ȱȱ __ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱȱ__ȱ
6.ȱȱ __ȱ__ȱ__ȱ__ȱȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ
7.ȱȱ __ȱ__ȱȱ__ȱ
ȱ
ȱ
ȱ
1.ȱPersonȱthatȱhasȱphysicalȱpossessionȱofȱbearerȱorȱorderȱpaperȱpayableȱtoȱtheȱorȬ
derȱofȱthatȱpersonȱasȱaȱpayeeȱorȱanȱindorseeȱ
2.ȱWhatȱkindȱofȱholderȱmustȱqualifyȱasȱaȱholder,ȱtakeȱcommercialȱpaperȱinȱgoodȱ
faith,ȱgiveȱvalueȱforȱit,ȱandȱnotȱhaveȱknowledgeȱofȱanyȱdefenseȱorȱdishonorȱofȱ
theȱinstrument?ȱ
3.ȱMostȱcommonȱmethodȱofȱdischargingȱcommercialȱpaperȱ
4.ȱTypeȱofȱdefenseȱthatȱisȱgoodȱagainstȱallȱplaintiffsȱsuingȱonȱaȱnegotiableȱinstruȬ
mentȱ
5.ȱAȱpersonȱwhoȱactsȱhonestlyȱisȱsaidȱtoȱactȱinȱwhat?ȱ
6.ȱMethodȱofȱdischargeȱthatȱconsistsȱofȱanyȱactȱofȱtheȱcurrentȱholderȱthatȱindicatesȱ
anȱintentȱtoȱendȱtheȱobligationȱ
8.ȱDefenseȱthatȱisȱgoodȱagainstȱanyȱholderȱthatȱisȱnotȱanȱHDCȱorȱaȱholderȱthroughȱ
aȱholderȱinȱdueȱcourseȱ
7-34 Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ31—1ȱENRICHMENTȱ
Inȱthisȱlesson,ȱyouȱlearnedȱthatȱtheȱobligationȱtoȱpayȱonȱcommercialȱpaperȱmayȱbeȱ
dischargedȱinȱoneȱofȱfiveȱways:ȱbyȱpayment,ȱbyȱcancellation,ȱbyȱalteration,ȱbyȱimȬ
pairmentȱofȱcollateral,ȱorȱasȱaȱcontract.ȱAloneȱorȱinȱgroups,ȱreviewȱtheȱdiscussionȱofȱ
eachȱofȱtheseȱprocessesȱinȱtheȱtext.ȱInȱtheȱappropriateȱspaceȱprovided,ȱfillȱinȱaȱbriefȱ
scenarioȱofȱaȱrealȱorȱimaginedȱexampleȱillustratingȱeachȱmeansȱofȱdischargingȱcomȬ
mercialȱpaper.ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
2.ȱByȱcancellationȱ
ȱ
ȱ
ȱ
ȱ
ȱ
3.ȱByȱalterationȱ
ȱ
ȱ
ȱ
ȱ
ȱ
4.ȱByȱimpairmentȱofȱcollateralȱ
ȱ
ȱ
ȱ
ȱ
ȱ
5.ȱAsȱaȱcontractȱ
Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers 7-35
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ31—2ȱQUIZȱ
Directions:ȱPlaceȱaȱTȱforȱTrueȱorȱanȱFȱforȱFalseȱinȱtheȱAnswersȱcolumnȱtoȱshowȱ
whetherȱeachȱofȱtheȱfollowingȱstatementsȱisȱtrueȱorȱfalse.ȱ
ȱ
ȱAnswersȱ
1.ȱAȱconsumerȱwhoȱusesȱanȱEFTȱtransactionȱmustȱreportȱanȱerrorȱofȱ
overbillingȱwithinȱ30ȱdays.ȱ
1._______ȱ
2.ȱTheȱriskȱofȱunauthorizedȱEFTsȱisȱdividedȱbetweenȱtheȱconsumerȱ
andȱtheȱfinancialȱinstitution.ȱ
2._______ȱ
3.ȱAȱconsumerȱmustȱnotifyȱtheȱfinancialȱinstitutionȱwithinȱfiveȱbusiȬ
nessȱdaysȱuponȱlearningȱofȱtheȱlossȱorȱtheftȱofȱanȱautomaticȱtellerȱ
card.ȱ
3._______ȱ
4.ȱMostȱcommercialȱpaperȱlawsȱapplyȱtoȱelectronicȱfundȱtransfers.ȱ4._______ȱ
5.ȱȱȱTheȱfederalȱgovernmentȱenactedȱtheȱElectronicȱFundȱTransferȱActȱ
toȱprotectȱconsumersȱmakingȱsuchȱtransfers.ȱ
5._______ȱ
7.ȱȱȱElectronicȱdataȱinterchangeȱisȱusedȱforȱinternationalȱtransactions.ȱ7._______ȱ
8.ȱȱAutomatedȱtellerȱmachinesȱareȱtheȱonlyȱdevicesȱthatȱfacilitateȱEFTs.ȱ8._______ȱ
ȱ
ȱ
LegalȱApplicationȱ
ȱȱ9.ȱSydneyȱlaidȱherȱcarȱkeysȱandȱherȱATMȱcardȱonȱaȱbathroomȱsinkȱwhileȱsheȱwasȱ
washingȱherȱhandsȱinȱaȱrestaurant.ȱWhenȱsheȱturnedȱtoȱdryȱherȱhands,ȱtheȱcardȱ
wasȱstolen.ȱSydneyȱcalledȱtheȱpoliceȱandȱherȱfinancialȱinstitutionȱfromȱaȱpayȱ
phoneȱinȱtheȱrestaurant’sȱparkingȱlot.ȱTheȱthiefȱmadeȱtwoȱwithdrawalsȱofȱ$75ȱ
andȱ$350ȱthatȱevening.ȱHowȱmuchȱofȱtheȱlossȱwillȱtheȱfinancialȱinstitutionȱhaveȱ
toȱbear?ȱExplainȱyourȱanswer.ȱ
7-36 Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ31—2ȱPRACTICEȱACTIVITYȱ
Readȱtheȱfollowingȱcasesȱandȱanswerȱtheȱquestionsȱaboutȱthem.ȱAttachȱaȱpageȱifȱadditionalȱ
spaceȱisȱneededȱforȱanswers.ȱ
ȱ
1.ȱInȱAprilȱ2002ȱAndrewȱGaleȱoverdrewȱhisȱcheckingȱaccountȱatȱHydeȱParkȱBank.ȱ
TransferȱAct.ȱTheȱBankȱhadȱpostedȱtheȱtransactionȱwithinȱ48ȱhoursȱofȱitsȱarrival.ȱ
DoesȱGaleȱhaveȱaȱcaseȱagainstȱtheȱbank?ȱ[Galeȱv.ȱHydeȱParkȱBank,ȱ384ȱF.3dȱ451ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
2.ȱAnȱunauthorizedȱpersonȱcalledȱaȱbank,ȱspokeȱwithȱaȱbankȱemployee,ȱandȱarȬ
rangedȱtoȱwithdrawȱ$4,900ȱfromȱaȱbankȱaccount.ȱWhenȱtheȱaccountȱholder,ȱwhoȱ
theȱcustomerȱsued.ȱDoesȱtheȱElectronicȱFundȱTransferȱActȱcoverȱthisȱtransaction?ȱ
Explain.ȱ[Kashanchiȱv.ȱTexasȱCommerceȱBank,ȱ703ȱF.ȱ2dȱ936ȱ(5thȱCir.ȱ1983)]ȱ
Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers 7-37
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ31—2ȱRETEACHȱ
ȱ
Directions:ȱȱWriteȱtheȱanswersȱtoȱQuestionsȱ1–5ȱonȱtheȱblanksȱprovided.ȱTheȱanswerȱ
toȱQuestionȱ6ȱshouldȱappearȱinȱtheȱverticalȱboxes.ȱ
ȱ ȱȱȱȱȱȱ6.ȱ
2.ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ__ȱȱ__ȱ__ȱȱ
4.ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ__ȱ__ȱȱ ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ
ȱ
ȱ
ȱ
ȱ
1.ȱTypeȱofȱlawȱthatȱwasȱinapplicableȱtoȱelectronicȱtransfersȱ
3.ȱAnȱelectronicȱ________ȱtransferȱisȱalsoȱcalledȱaȱwireȱtransfer.ȱ
5.ȱNumberȱofȱdaysȱaȱconsumerȱhasȱtoȱreportȱanȱoverbillingȱerrorȱ
6.ȱElectronicȱtransfersȱofȱlargeȱamountsȱofȱthisȱbyȱbusinessesȱareȱgovernedȱbyȱtheȱ
UniformȱCommercialȱCodeȱ
ȱ
7-38 Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ31—2ȱENRICHMENTȱ
Inȱrecentȱyears,ȱaȱvarietyȱofȱtransactionsȱhaveȱbegunȱtakingȱplaceȱnotȱwithȱcommerȬ
cialȱpaper,ȱbutȱwithȱelectronicȱfundȱtransfersȱ(EFT).ȱAnȱEFTȱisȱaȱtransferȱofȱfundsȱ
thatȱrequiresȱaȱfinancialȱinstitutionȱtoȱdebitȱorȱcreditȱanȱaccount.ȱTheȱtransferȱisȱinitiȬ
atedȱbyȱtheȱuseȱofȱanȱelectronicȱterminal,ȱcomputer,ȱtelephone,ȱorȱmagneticȱtape.ȱ
ExamplesȱofȱdevicesȱthatȱfacilitateȱEFTsȱincludeȱautomatedȱtellerȱmachines,ȱpointȬ
ofȬsaleȱterminalsȱinȱstores,ȱpayȬbyȬphoneȱsystemsȱthatȱeliminateȱcheckȱwriting,ȱandȱ
automatedȱclearinghouseȱnetworksȱthatȱcreditȱpayrollȱchecksȱdirectlyȱtoȱaccounts.ȱ
Interviewȱfamilyȱmembersȱand/orȱfriendsȱwhoȱhaveȱusedȱEFTs,ȱandȱprovideȱdetailsȱ
ofȱtheirȱresponsesȱinȱtheȱspacesȱfollowing.ȱ
ȱ
1.ȱListȱspecificȱexamplesȱofȱtheȱvariousȱwaysȱyourȱintervieweesȱhaveȱusedȱEFTs.ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
2.ȱWhatȱprecautionsȱdoȱtheȱEFTȱusersȱandȱtheȱfinancialȱinstitutionsȱtakeȱtoȱensureȱ
thatȱfundsȱdoȱnotȱpassȱintoȱorȱoutȱofȱtheȱincorrectȱaccountȱorȱintoȱaȱfraudulentȱ
user’sȱhands?ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
3.ȱAreȱyourȱintervieweesȱawareȱofȱtheȱinformationȱprovidedȱinȱtheȱtextȱregardingȱ
theȱconsumer’sȱresponsibilityȱofȱreportingȱoverbillingȱandȱunauthorizedȱtransȬ
fersȱandȱtheȱconsumer’sȱamountȱofȱliabilityȱinȱtheȱeventȱofȱanȱauthorizedȱtransȬ
fer?ȱHowȱdoȱfinancialȱinstitutionsȱattemptȱtoȱmakeȱthisȱinformationȱknownȱtoȱ
theȱpublic?ȱ
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱȱ
TESTȱ
CHAPTERȱ31ȱ
SECTION I—IDENTIFY LEGAL TERMS
Directions:ȱIndicateȱwhetherȱeachȱdefenseȱisȱuniversalȱorȱlimitedȱbyȱwritingȱUȱorȱLȱinȱ
heȱspaceȱprovided.ȱt
Answers
1
.ȱBreachȱofȱcontractȱ
2
.ȱConditionalȱdeliveryȱ
3
.ȱDefensesȱstemmingȱfromȱaȱconsumerȱtransactionȱ
4
.ȱDuressȱdeprivingȱcontrolȱ
5
.ȱFailureȱofȱconsiderationȱ
6
.ȱForgeryȱ
7
.ȱFraudȱasȱtoȱtheȱessentialȱtermsȱ
8
.ȱFraudȱinȱtheȱexecutionȱ
9
.ȱFraudȱinȱtheȱinducementȱ
10.ȱIllegalityȱ
11.ȱMinorityȱ
12.ȱOrdinaryȱduressȱ
13.ȱPriorȱpaymentȱ
14.ȱTemporaryȱincapacityȱtoȱcontractȱ
15.ȱTheftȱ
ȱ1.ȱȱ ȱ
ȱ2.ȱȱ ȱ
ȱ3.ȱȱ ȱ
ȱ4.ȱȱ ȱ
ȱ5.ȱȱ ȱ
ȱ6.ȱȱ ȱ
ȱ7.ȱȱ ȱ
ȱ8.ȱȱ ȱ
ȱ9.ȱȱ ȱ
ȱ10.ȱȱ ȱ
ȱ11.ȱȱ ȱ
ȱ12.ȱȱ ȱ
ȱ13.ȱȱ ȱ
ȱ14.ȱȱ ȱ
ȱ15.ȱȱ ȱ
SECTION II—THINK CRITICALLY ABOUT LEGAL CONCEPTS
Directions:ȱInȱtheȱAnswersȱcolumnȱatȱtheȱrightȱofȱeachȱstatement,ȱwriteȱtheȱletterȱthatȱ
representsȱtheȱword,ȱorȱgroupȱofȱwords,ȱthatȱcorrectlyȱcompletesȱtheȱstatement.ȱ
ȱ
ȱȱ Answers
16.ȱȱ Allȱholdersȱhaveȱtheȱrightȱtoȱ(a)ȱassignȱbutȱnotȱdischargeȱtheȱpaper,ȱ
(b)ȱnegotiateȱbutȱnotȱenforceȱpayment,ȱ(c)ȱdischargeȱtheȱpaperȱwithȱ
orȱwithoutȱpaymentȱinȱreturn,ȱ(d)ȱnoneȱofȱtheseȱ
16._______ȱ
7-40 Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers
ȱȱ Answers
17.ȱWhenȱtryingȱtoȱcollectȱonȱanȱinstrument,ȱwhoȱisȱlegallyȱplacedȱinȱ
theȱsameȱpositionȱasȱassignee?ȱ(a)ȱHDC,ȱ(b)ȱHHDC,ȱ(c)ȱholder,ȱ(d)ȱ
bothȱaȱandȱbȱ
17._______ȱ
18.ȱȱ AȱfirstȬtimeȱholderȱofȱanȱinstrumentȱwhoȱsellsȱitȱtoȱaȱqualifiedȱ
HDCȱandȱthenȱtakesȱitȱbackȱfromȱtheȱHDCȱhasȱ(a)ȱimprovedȱtheirȱ
positionȱonȱcommercialȱpaperȱthroughȱreacquisition,ȱ(b)ȱonlyȱtheȱ
originalȱrightsȱasȱaȱmereȱholder,ȱ(c)ȱtheȱrightsȱofȱanȱHDC,ȱ(d)ȱtheȱ
rightsȱofȱanȱHHDCȱ
18._______ȱ
19.ȱDefensesȱthatȱareȱgoodȱagainstȱeveryoneȱexceptȱanȱHDCȱorȱanȱ
HHDCȱareȱtermedȱ(a)ȱlimitedȱdefenses,ȱ(b)ȱrealȱdefenses,ȱ(c)ȱuniȬ
versalȱdefenses,ȱ(d)ȱallȱofȱtheseȱ
19._______ȱ
20.ȱȱ ToȱbeȱconsideredȱanȱHDC,ȱaȱholderȱmustȱ(a)ȱgiveȱadequateȱvalueȱ
inȱrelationȱtoȱtheȱcommercialȱpaper,ȱ(b)ȱknowȱallȱtheȱdefensesȱ
againstȱenforcementȱofȱtheȱpaper,ȱ(c)ȱknowȱthatȱtheȱpaperȱisȱoverȬ
due,ȱ(d)ȱtakeȱtheȱpaperȱinȱgoodȱfaithȱandȱgiveȱvalueȱ
20._______ȱ
21.ȱAtȱmaturityȱorȱonȱdemand,ȱtheȱholderȱofȱcommercialȱpaperȱmayȱ
(a)ȱacceptȱpaymentȱmadeȱinȱmoney,ȱ(b)ȱagreeȱtoȱacceptȱotherȱ
commercialȱpaper,ȱ(c)ȱagreeȱtoȱtakeȱdifferentȱkindsȱofȱproperty,ȱ
(d)ȱallȱofȱtheseȱ
21._______ȱ
22.ȱȱ Commercialȱpaperȱmayȱnotȱbeȱdischargedȱbyȱ(a)ȱaccordȱandȱsatisȬ
faction,ȱ(b)ȱcancellationȱresultingȱfromȱfraud,ȱ(c)ȱfraudulentȱalteraȬ
tion,ȱ(d)ȱnovationȱ
22._______ȱ
23.ȱAnȱwireȱtransferȱisȱ(a)ȱconductedȱwithoutȱpaperȱinstrumentsȱsuchȱ
asȱchecksȱorȱdrafts,ȱ(b)ȱgovernedȱbyȱcommercialȱpaperȱlaw,ȱ(c)ȱ
mandatoryȱatȱallȱfinancialȱinstitutions,ȱ(d)ȱonlyȱlegalȱinȱaȱfewȱ
statesȱ
23._______ȱ
24.ȱIfȱmoreȱthanȱtwoȱdaysȱhaveȱpassedȱbeforeȱnotificationȱofȱunauȬ
thorizedȱelectronicȱfundȱtransfers,ȱtheȱcustomerȱmayȱbeȱresponsiȬ
bleȱforȱupȱtoȱaȱmaximumȱofȱ(a)ȱ$50,ȱ(b)ȱ$100,ȱ(c)ȱ$500,ȱ(d)ȱ$1,000ȱ
24._______ȱ
25.ȱElectronicȱfundȱtransfersȱbyȱbusinessesȱareȱgovernedȱbyȱ(a)ȱArticleȱ
4AȱofȱtheȱUCC,ȱ(b)ȱCMI,ȱ(c)ȱEDI,ȱ(d)ȱEFTAȱ
25._______ȱ
ȱ
Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers 7-41
SECTION III—APPLY LEGAL PRACTICES
26.ȱTheȱholderȱofȱEric’sȱnoteȱfraudulentlyȱchangedȱtheȱrateȱofȱinterestȱdueȱfromȱ8ȱ
percentȱtoȱ18ȱpercent.ȱDoesȱEricȱhaveȱtoȱpay?ȱExplainȱyourȱanswer.ȱ
Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers
7-42ȱ
ȱ
ANSWERS
Lessonȱ31—1ȱ
Quiz
Practice Activity
1.ȱYes,ȱKaneȱisȱaȱholderȱinȱdueȱcourse.ȱTheȱcourtȱheldȱthatȱinȱorderȱtoȱbeȱaȱholderȱinȱ
dueȱcourse,ȱaȱpersonȱmustȱtakeȱtheȱinstrumentȱforȱvalueȱ(satisfiedȱhereȱbyȱ
Kane’sȱtakingȱofȱtheȱcheckȱfromȱGrace);ȱmustȱtakeȱtheȱinstrumentȱinȱgoodȱfaithȱ
2.ȱYes,ȱtheȱdebtȱwasȱdischarged.ȱTheȱcourtȱdisagreedȱwithȱCrown.ȱItȱheldȱthatȱtheȱ
Reteach
Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers 7-43
Enrichment Activity
Lessonȱ31—2ȱ
Quiz
ȱ
ȱ9.ȱBecauseȱbothȱwithdrawalsȱwereȱmadeȱafterȱSydney’sȱcall,ȱtheȱfinancialȱinstituȬ
Practice Activity
1.ȱTheȱcourtȱfoundȱhereȱthatȱalthoughȱtheȱbankȱdidȱnotȱdepositȱhisȱcheckȱforȱfourȱ
months,ȱtheyȱwereȱnotȱliableȱtoȱGale.ȱTheȱcourtȱheldȱthatȱsinceȱGaleȱwroteȱ
2.ȱNo,ȱtheȱEFTAȱdoesȱnotȱcoverȱthisȱtransaction.ȱTheȱcourtȱheldȱthatȱaȱtransferȱofȱ
moneyȱauthorizedȱoverȱtheȱtelephone,ȱwhichȱwasȱallegedȱbyȱtheȱaccountȱholderȱ
toȱbeȱfraudulent,ȱwasȱnotȱcoveredȱbyȱtheȱEFTA.ȱThisȱactȱexcludesȱtelephoneȱ
Reteach
ȱ
Enrichment Activity
Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers
7-44ȱ
ȱ
ANSWERS TO TEST QUESTIONS
SECTIONȱIȱ
ȱ
SECTIONȱIIȱ
ȱ
SECTIONȱIIIȱ
26.ȱIfȱtheȱfraudulentȱchangeȱisȱprovenȱinȱcourt,ȱEricȱwillȱnotȱhaveȱtoȱpay.ȱHowȬ
Chapter 31 Discharge of Commercial Paper and Electronic Fund Transfers 7-45
ȱȱ
